lululemon athletica, inc. :LULU-US: Earnings Analysis: Q1, 2018 By the Numbers : June 6, 2017

lululemon athletica, inc. reports financial results for the quarter ended April 30, 2017.

We analyze the earnings along side the following peers of lululemon athletica, inc. – Express, Inc., Gap, Inc., Zumiez Inc., Yue Yuen Industrial (Holdings) Limited Unsponsored ADR, adidas AG Sponsored ADR, Aeropostale, Inc. and bebe stores, inc. (EXPR-US, GPS-US, ZUMZ-US, YUEIY-US, ADDYY-US, AROPQ-US and BEBE-US) that have also reported for this period.


  • Summary numbers: Revenues of USD 520.31 million, Net Earnings of USD 31.25 million.
  • Gross margins widened from 48.26% to 50.42% compared to the same period last year, operating (EBITDA) margins now 15.48% from 12.77%.
  • Year-on-year change in operating cash flow of -51.18% is about the same as the change in earnings, likely no significant movement in accruals or reserves.
  • Earnings declined although operating margins improved from 8.90% to 11.03%.

The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:

2017-04-30 2017-01-31 2016-10-31 2016-07-31 2016-04-30
Relevant Numbers (Quarterly)
Revenues (mil) 520.31 789.94 544.42 514.52 495.52
Revenue Growth (%YOY) 5 12.16 13.49 13.58 16.99
Earnings (mil) 31.25 136.14 68.29 53.63 45.34
Earnings Growth (%YOY) -31.08 15.94 28.47 12.5 -5.17
Net Margin (%) 6.01 17.23 12.54 10.42 9.15
EPS 0.23 0.99 0.5 0.39 0.33
Return on Equity (%) 9.23 42.47 23.14 18.71 16.76
Return on Assets (%) 7.65 34.72 18.87 15.23 13.36

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Market Share Versus Profits

Revenues History
Earnings History

LULU-US‘s change in revenue this period compared to the same period last year of 5.00% is almost the same as its change in earnings, and is about average among the announced results thus far in its peer group, suggesting that LULU-US is holding onto its market share. Also, for comparison purposes, revenues changed by -34.13% and earnings by -77.05% compared to the immediate last period.

Revenues Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Leader, Earnings Focus, Laggard, Revenues Focus

Earnings Growth Analysis

The company’s year-on-year earnings decline did not come as a result of a contraction in gross margins or because of any cost control issues. Both gross margins and operating margins (EBITDA) margins actually improved over this time frame. Gross margins went from 48.26% to 50.42%, while operating margins improved from 12.77% to 15.48% over this period. For comparison, gross margins were 54.17% and EBITDA margins 27.94% in the immediate last period.

Gross Margin Versus EBITDA Margin

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Commodity; Low Cost, Commodity; High Cost, Differentiated; High Cost

Gross Margin Trend

Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.

Gross Margin History
Working Capital Days History

LULU-US‘s gross margin improvement has not produced any big difference in its working capital. Working capital days are currently 161.60, compared to last year’s level of 134.09 days. This leads Capital Cube to conclude that the improvements in gross margins are likely from operating decisions and not trade-offs with the balance sheet.

Gross Margin Versus Working Capital Days

Quadrant label definitions. Hover to know more

Customer Financed, Cash Starved, Supplier Financed, Cash Rich

Cash Versus Earnings – Sustainable Performance?

It is important to examine a company�s cash versus earnings numbers to gauge whether its performance is sustainable.

LULU-US‘s change in operating cash flow of -51.18% compared to the same period last year is about the same as its change in earnings this period. Additionally, this change in operating cash flow is about average among its peer group. This suggests that the company did not use accruals or reserves to manage earnings this period, and that, all else being equal, the earnings number is sustainable.

Operating Cash Flow Growth Versus Earnings Growth

Quadrant label definitions. Hover to know more

Cash Flow based Earnings, Likely Non-cash Earnings, Low Cash Flow Base, Likely Undeclared Earnings


Despite an overall improvement in operating (EBIT) margins, the company’s earnings fell. EBIT margins went from 8.90% to 11.03%. The decline in earnings appears to be largely because of one-time items. Pretax margins declined from 11.52% to 8.90%.

EBIT Margin Versus PreTax Margin

Quadrant label definitions. Hover to know more

Operation driven Earnings, One-time Favorables, Low Earnings Base, One-time Unfavorables
EBIT Margin History
PreTax Margin History

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Company Profile

Lululemon Athletica, Inc. designs and retails athletic apparels primarily in North America and Australia. It offers a comprehensive line of apparel and accessories, including fitness pants, shorts, tops and jackets designed for athletic pursuits such as yoga, running and general fitness. The company operates through corporate owned stores and direct to consumer segments. Its yoga-inspired apparel is marketed under the Lululemon Athletica brand name. lululemon athletica was founded by Dennis J. Wilson in 1998 and is headquartered in Vancouver, Canada.

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